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Saturday, 8 February 2014

China buying Gold

Gold shipments to China from Hong Kong rose to a record in 2013.

Purchases that climbed by 51 percent in December before the Lunar New Year holiday starting Jan. 31 took net imports for the year to 1,108.8 metric tons, a 33 percent gain from 2012, according to calculations by Bloomberg News based on data from the Hong Kong Census and Statistics Department. The net figure deducts flows from China into Hong Kong.

That is equivalent to over 50% of global mine production, or 35% of total world supply. Despite import duties India demand has also increased. Between the two countries net demand for gold exceeds the amount produced from global mine production in 2013.

A gold vault that can store 2,000 metric tons, double China’s projected consumption this year, opened in Shanghai this month as owner Malca-Amit Global Ltd. seeks to benefit from rising demand in Asia’s largest economy.

The facility is the biggest for the Hong Kong-based company, and it can also store diamonds, jewelry and art, Joshua Rotbart, precious metals general manager, said in an interview. The site could hold bullion worth about $82.5 billion at today’s price.

China’s total demand may reach 1,000 tons for 2013, the World Gold Council forecasts.

Consumption in China will increase 29 percent to a record this year, overtaking India as biggest user as lower prices and higher incomes spur demand, according to the WGC. The investment in Shanghai’s new free-trade zone reflects a shift in world demand away from the U.S. and Europe toward Asia. Demand for gold jewelry, bars and coins in Greater China, India, Indonesia and Vietnam is now about 60 percent of the global total, up from 35 percent in 2004.

The People’s Bank of China has not provided an update on its bullion reserves since 2009, when it reported a holding of 1,054 tonnes. But the suspicion among some analysts is that China’s central bank has purchased up to 300 tonnes of gold this year.

China does not report on its gold trade. Instead analysts have to rely on data from other jurisdictions, which show by far the bulk of the gold coming from Hong Kong. Records show that exports of gold from Hong Kong to China reached 955 tonnes by the end of October, up from 376 tonnes over the same period in 2012. Net imports from Hong Kong more than doubled to 826 tons in the first nine months of the year.

Shanghai is home to the country’s biggest physical gold exchange, founded by the People’s Bank of China. Gold volume on the Shanghai Gold Exchange rose to a five-month high of 22,703 kilograms on Oct. 8.